Zeek Rewards compliance, tax and marketing issues
About a week ago now Zeek Rewards announced that they were putting out a compliance certification course that was going to be mandatory for all Zeek Rewards members.
Coming in at a cost of $9.95 ($4.95 if purchased within the first 14 days), Zeek Rewards compliance appears to be targeting members who misleading advertise the Zeek Rewards investment opportunity.
Set to launch on Monday the 23rd January, Zeek Rewards recently announced that there were going to be ongoing delays in the roll out of their compliance program.
the process of testing the course, writing the feedback, getting modifications in place and re-testing is going to take a few weeks at least
at this stage Zeek Rewards haven’t set a firm deadline for compliance roll out.
Testing, feedback and yada yada could very well be the reason for the delay but I’m inclined to think there’s more to this story than Zeek are letting on.
Firstly, MLM compliance is nothing new and as far as Zeek Rewards goes, it’s not like we’re covering new territory here. Most MLM companies tend to cover compliance in their terms and conditions and/or distributor agreements so it’s a little strange Zeek are pushing a separate agreement onto their members, let alone one that appears is going to take over a month just to finalize.
Second of all is the fact that partnership with MLM attorney Kevin Grimes or not, exactly how Zeek plan to make themselves legally compliant at this stage appears to be a mystery.
As it stands, I can join Zeek Rewards and invest my money in exchange for VIP bids. Without finding a single customer of my own, I can then transfer these bids to Zeek Rewards, who in turn will accept them and pay me a daily ROI on these bids regardless of whether Zeek actually give my bids away or not.
In essence, Zeek are generating my ROI on the bids I’m supposed to have given away, when infact they as of yet haven’t been given away.
Good luck making that legally compliant guys.
With this fundamental legal flaw existing in the Zeek Rewards compensation plan, I believe this is probably the primary reason for the delays in rolling out the compliance course.
Right now Paul Burks and the other Zeek Rewards admins are probably sitting around wondering how to make the obvious changes to the compensation plan necessary, without losing the bulk of their members who inject money into the company by using it as a straight up investment opportunity.
Unless Zeek abolish the option to sell bids to the company who then pay returns on said bids without actually giving them away, this is simply not possible.
Irrespective of what else is possible within the Zeek Rewards business opportunity, this one aspect of the compensation plan pretty much guarantees that ‘as is’, the Zeek Rewards opportunity is never going to be legally compliant. And I’d love to hear from anyone claiming otherwise.
In the meantime, after initially warning members ‘NOT advertise that there is no Sponsoring or recruiting necessary to earn income‘, despite the fact that this is entirely possible by giving away bids directly to Zeek Rewards who then pay out a daily return before they’ve actually given the bids away, the company has decided this wasn’t enough and effective forty eight hours ago,
After careful consideration and several meetings with our legal teams it has been decided that no independent marketing materials are allowed to be used for the time being.
This includes member created websites, banners, classified ads and any marketing campaigns Zeek Rewards members are running.
Looking at the previous demand from Zeek that its members not mention the fact that you don’t need to recruit or sponsor anyone to participate in the investment scheme, it appears the company accepts this is not the case but still doesn’t want its members advertising this. At least not using any specifically worded copy the company itself hasn’t approved.
One would think if the Zeek Rewards opportunity was straight forward enough the usual ‘don’t advertise income potential etc.’ caveats MLM companies enforce upon their memberbases would have been enough. Evidently the grey area Zeek operate in requires more of a heavy-handed totalitarian approach.
Another thing I’ve been watching over the past few days is discussion amongst Zeek Rewards members over their tax liabilities for participating in the company’s investment opportunity.
Having invested an initial amount into the Zeek Rewards investment opportunity for VIP bids which are then turned into points by giving the bids away to the company, many members hope to grow their daily ROI paid out on their bids by re-investing their daily payout back into the purchase of more VIP bids.
As such, an uncertainty seems to have risen over the question of whether or not the daily payout Zeek issues its members counts as taxable income or a business expense when re-invested back into the company through the purchase of VIP bids.
Earnings wise there’s definitely a clear-cut case that Zeek Rewards pays out members participating in the investment scheme a daily return in cash. Regardless of whether this cash is re-invested back into the scheme or not (on autopilot or otherwise), this is still money being paid to members and as such counts as taxable income.
What will be interesting to see is if Zeek members can claim their bid purchases/re-purchases as a business expense.
On one hand doing so cements the fact that Zeek Rewards is an investment opportunity (you invest your money into the business to get a higher ROI and write off the investment as a business expense), and on the other you have those members who got in early, have amassed thousands – even hundreds of thousands in VIP bids and with heavy re-investment, now face the prospect of having to pay tax on thousands (hundreds of thousands?) of dollars of income from Zeek Rewards.
The problem is they’ve re-invested most of this money (an 80/20 investment rule appears to be popular with Zeek Rewards members) and have nothing to show for it except their VIP points, which outside of the Zeek Rewards business opportunity are worthless.
As far as the company goes, Zeek Rewards will issue tax statements for members who have earnt over $600 but CEO Paul Burks has categorically stated that Zeek Rewards itself will not be issuing tax advice to Zeek Rewards members.
What ultimately happens regarding potential tax owed by Zeek Rewards members will definitely be interesting to see, especially for those who have amassed large VIP point balances and currently enjoy large daily returns on their investment.
Between these tax issues, the fact that Zeek Rewards business model clearly isn’t legally compliant (at least as far as the investment scheme goes) and just how far the company is going to go in controlling how its members market Zeek Rewards, it’ll be interesting to see what happens over at Zeek HQ in the following months.
On the giving away of points to the pool, the way most distributors have this setup:
1. Customers to the penny auction sign up and are given free bids from a company pool.
2. Distributors owe this amount to the pool
3. When daily profit is awarded, distributor buys bids and pays back the pool.
So while what you say is possible – that distributors have no customers and just give away bids to a pool (which will get distributed to customers when they come on board) – most distributors do actually give bids to customres or are paying back a negative balance to the pool which had given away bids to customers on their behalf.
Also worth nothing that I think you can only put points into the pool if you subscribe to the 5cc rotator, for a fee per customer generated. This repeats the pattern of all Burks companies where there are constant fees – marketing system, co-op rotator, compliance.
Since many do not want to pay a fee to use the rotator, many distributors sign up people they know (mom, dad, and sister) and just give points to them so they can “play the auction”. Zeek tells you give away bids to potential customers, they love it, and start buying more (where they actually spend money).
I think this is very poor strategy. If you look at the usual cycle of a penny auction – new players get suckered in but eventually realize they spend a lot of money for a low probability change of winning anything. So they give up after a few hundred dollars spent.
Now here, Zeek is telling distributors to give away 300, 500 bids, etc. After a new player uses up that many bids, they will realize 1) I can’t win anything with any reasonable probability that makes this worthwhile, and 2) the number of auctions and prizes are terrible.
There is a maximum of 1000 bids you can give away so if you have a really large point balance, you need a lot of fake customers. Of course, all that’s needed is an email address, so if you don’t care about the value of the bids (either to a real friend to use it in the auction, or to a real prospect in hopes they buy more and you get a commission), you can always create fake accounts give away bids, and just let them vanish in the ether.
My belief is the compliance program is to protect Zeek from its customers when the inevitable happens, more so than to protect Zeek from regulators.
Distributor agreements always get challenged in court when you show that even though the agreement said one thing, the company behavior or their acceptance of other top distributors’s behavior was implicit acceptance of a different set of rules than in the agreement.
The compliance is just another layer of defense they can use when a distributor wants to sue for lost money and Zeek will say “you should have known better – look at your distributor agreement, look at the contract you signed when you sent in a check, and look at the content you were certified on with that compliance course”.
The distributors are parroting the company line that this is good for them, good for the company, that it means the company cares, etc. If the company does care, why can’t they just shave off 0.01% from the daily profit share and pay for the compliance course and offer it for free?
How many distributors will this new compliance course deter “well, I was only going to spend $100, not worth the trouble”.
What I have seen is a lot of distributors who started off at $100 investment and in 3 months see it at “300 points” decides “this thing is for real” and then make the big investment of $1000 to $10,000. Of course, strategically if you enter a money game you want to put as much in up front as possible to increase the chance you can get it out.
But what will happen with the compliance course is it will deter all of the “small investors” and Zeek won’t benefit from the self-proof that occurs over time with compounding daily profit.
“Investment” is far more heavily regulated than regular “business opportunities”, as it also falls under the SEC instead of merely FTC, at least in the US. ZeekRewards have to cover their own rear lest some State Attorney Generals decided to slap them with a “operating as investment without license”.
Heck, is it even legal to take in money and promise ROI when they don’t have a banking license? That breaks BANKING laws (which is yet separate from business or investment laws…)
Come to think of it, that’s EXACTLY why they have to ban any sort of mention as “investment”. They are operating as investment without investment license.
The other day we were researching Wazzub and we found a Cease and Desist (not against Wazzub, but the same address) that the guy registered a bunch of corporations all with “investment” or “trust” or “bank” in the name, but the guy doesn’t have an investment or such license, and State of Oregon issued him an order to never do THAT again.
So misrepresenting itself as an ‘investment’ can be serious. And that appears to be what Grimes found.
Why the guy didn’t do that months ago? Hmmm…
Because they obviously couldn’t have grown nearly as fast if people didn’t believe it was an investment. What is sad is if you look at people’s Facebook and blog entries on this they think this will be around for years and they are relying on this as income and…
Every time someone shows me examples of others who have these large 5 and 6 figure balances and are cashing out thousands a month, I ask them how they achieved it? Did they use the word “investment,” “compound,” “equity,” “deposit,” in their conversations when recruiting others? Did they say “no recruiting”? Did they share spreadsheets, income projections, show videos of back offices on YouTube showing the 5 and 6 figure point balances and cash outs?
All these things are explicitly banned now by corporate compliance. How can I duplicate the success of my sponsor who is living the good life if I cannot do the same thing my sponsor did?
So you’re saying it’s a “bait-and-switch” then? 🙂
I’m not 100% convinced that is the case, though that’s the practical impact. I think it is more likely Zeek didn’t quite know what they were doing. They weren’t aware of the banking laws, which as you suggested puts them under much broader regulatory scrutiny.
In fact, many shady MLM’s have flown under the regulatory radar for a long time but ones but banking/financial/currency related scams get taken down much more rapidly.
I make this assessment based on the genuine surprise on their corporate calls and indecision on how to manage compliance. If they knew it was going to be b&s from the beginning, they’d have a much smoother operation.
What is scary is despite all of these strange moves by the company, this money-game could last for many months based on current recruiting rate. It will be really interesting to see what happens to recruiting when compliance actually decides to do something.
As of yet, none of the obvious offenders have been taken down that I am aware. That makes it unfair for everyone else who wants to create a YouTube video but does not want to be in violation… meanwhile, the offender keeps getting more sign-ups.
“Zeek didn’t quite know what they were doing” is probably right. Paul Burks seems to have acted as a “hobby-lawyer”, without the skills needed.
Here’s a dialogue from another thread:
I have seen this many times before. Small companies claiming to have legal staff is usually bullshit. They’re only trying to look more impressive than they are.
Paul Burks seems to have overfocused on “agreements” and “terms and conditions”, legal forms and procedures that have a relatively low rank in the hierarchy of laws. They are meant to cover agreements between two parties, and they won’t “free” the parties from following other laws.
You can’t “agree” with someone “this is not an investment” or similar agreements. If you offer investments you’ll have to follow appropriate laws for investments, and you’ll also need some licenses or something.
Paul Burks seems to have tried to cover his legal behind in some areas, but he seems to have missed a lot of other areas. He’s now using a professional lawyer to cover areas he missed himself.
Time to act for someone?
I believe this is the right time to act if you’re a newly recruited investor, and wants to withdraw your investment. He is in a vulnerable position right now, and may be willing to make some agreements (if there’s not too many of them).
This still doesn’t change the fact that they were paid a return on bids that weren’t given away.
Not withstanding the dubiousness of no matching or checking of the bids used with what is actually paid out.
I suspect this is what will happen if compliance cracks down too hard.
Either that or everyone will just jump ship to JSS Tripler, Just Been Paid or one of their clones – less trying to hide behind the legitimacy of MLM with those investment schemes.
Ten or fifteen years ago who would have even considered the massive amount of money internet businesses such as Yahoo and Google would generate? Imagine the largest yard sale in the world–eBay–online. This is the wild west in marketing and no one has any corners on where this will lead.
Suppositions are one thing. Facts are another. I’ve been in Zeek at the Diamond level ($99/month) since the second week of December. I have intentionally not put in one dollar from my own personal bank account, just purchased bids at every opportunity and to date have reached 8,000 VIP points.
Averaging the profit sharing rate for me since I enrolled, I’m at about $140/day which I choose to purchase bids with. On the Matrix side,I enrolled 6 serious networkers when I joined. I’m pulling out my matrix commissions starting this weekend; am at over $800 monthly in residuals on affiliates who have joined and currently have between 10 and 15 enrollments daily coming in.
I’ve never had so much enjoyment working with a company that provides an opportunity to be in both upper and lower right-hand quadrants of Robert Kiyosaki’s “cash flow quadrant” at the same time: that would be making money on other people’s time and also other people’s money.
Zeek is well situated in policies and procedures so far as I can see. Who knows the future? But trashing it without justification appears to be the play yard of those who have not been successful in the networking industry.
So you paid for your participation in Zeek’s investment scheme by recruiting others?
I think the fact you had to recruit others to participate is reason enough.
The only other alternative is to invest your own money, which is just as unsustainable in the long term (nobody investing = no daily return for you).
The ideas behind this blog is described in “About”.
The main concern here has been about how the ROI is generated, if they use money from new investors to pay old investors (like a Ponzi scheme). Most negative comments are related to that single issue. Maybe you can add some valuable information here?
I have already checked the Free Store Club shops, and they doesn’t seem to be very active. I have also checked some of the websites, and they mostly tries to attract new “investors” rather than “customers”. I haven’t checked “the daily ads”, and I have only partly checked the penny auction market.
The penny auction market didn’t seem to have what’s needed to support the ROI here – the contineously growing number of customers eagerly waiting for new bids each and every day, fighting for the right to buy bids before the supplies becomes empty. The market seemed more like it has decreased in the last couple of years?
If this is a Ponzi scheme, then you wouldn’t recommend it either, at least if we’re talking about recommending it to close friends and family? Or maybe you would, but that isn’t important.
At this stage I don’t think this is a very good opportunity to join. Most people put in money from their bank account as a “starting capital”, and then they use 4-6 months or more “to let the money grow” buying VIP Points, and then they start to withdraw money gradually. People who joins now will probably not make any money, if they follow “standard ideas” like most people do.
In Zeek we also have “additional problems”. It looks like Paul Burks has acted as a “Legal Staff” himself until just recently? Starting to use a professional lawyer now means lots of changes, usually affecting recruitment and income. It will usually also mean lots of “unsolved trouble” (like tax problems and so on).
Seriously, you can’t expect me to recommend this opportunity? Only people PAID to recommend it would have recommended it now. Most people that recommends it are involved in it themselves, and will loose money if they don’t continue to recommend it.
Irrelevant analogy to other Internet businesses.
Exactly, so what facts do you have to offer?
Sorry, you said you’re $99/month, but you did NOT put in any of your own money, EXCEPT TO PURCHASE BIDS. So who paid the $99 a month? Did you skip over a few things? And you asked us to check the facts?
The problem is you don’t even see the problem.
The definition of pyramid scheme by FTC is very simple: if you pay to join, and you get paid for recruiting others, who are also expected to do the same, then it is a pyramid scheme. It doesn’t matter what else you attach to it.
You paid for membership, you get “commission” by recruiting others who also paid for membership (and will get commission for people they recruit). Yep, pyramid scheme.
Irrelevant if it’s illegal pyramid scheme.
Are you a lawyer? A MLM lawyer to be specific? How do you know its policies and procedures is sufficient for legal compliance? I can quote you stuff from mlmlaw.com or mlmatty.com, known experts in MLM law field that proves my side. What can you provide as proof to counter that?
We’re providing truth, not “trashing” as you are insinuating.
If you don’t think it’s true, provide some proof, other than your personal testimonials. Personal testimonials are the easiest to make, and because you’re in it, your testimonial is obviously biased.
You have your information incorrect. The bids are not just given back to the company…the bids are transferred to actual customers.
Everything will be perfectly fine as they are going above and beyond to do things right.
It’s going to be funny to see this company flourish and all the naysayers sit back not making a dime because they choose to “assume” versus getting their facts straight.
If you sign up for 5cc as a Diamond, and you have no customers, your bids are automatically given to the “company pool”. So with 10 free customers purchased via 5cc, you would have 10,000 points that were given to the pool that you can now payback at your leisure with your daily profit share.
It doesn’t matter what actual real customers you ever get via 5cc or not, the pool creates a layer of abstraction because all that matters is the money affiliates deposit and not actual real retail customer revenue which is probably next to nothing.
Participants in ZeekRewards made a few statements for how the money was generated:
* revenue generated through Penny Auctions
* revenue generated via sales in Free Stores Club
I checked both of these sources of revenue, and both of them seemed to be pretty unimportant. The major source of money seemed to be investments from new and old investors, and this makes ZeekRewards similar to a Ponzi scheme.
Take a look at your own Free Stores Club?
* Have you ever sold anything from it to external customers?
* Does it generate any significant amount of money?
Take a look at your own website(s)?
* Do they focus on the Free Stores Club or the opportunity?
* Do they try to attract real customers to the auctions, or do they try to attract investors to the opportunity?
Take a look at the market for Penny Auctions?
* Is there a rapidly growing demand in this market, with lots of new customers, and several new Penny Auction companies starting each year in local markets here and there, where some of the companies grows bigger for each year they are in business?
* Is there a growing number of new “How to win Penny Auctions” books released each year, sold in a growing market? Or are “the same old books” released a few years ago still the most popular ones, where the authors seems to have lost most of their interest in frequently updating their websites?
As far as I could see, the Free Stores Club doesn’t generate any significant amount of money, 95 percent of the content of the websites are focusing on the opportunity rather than real customers, and the market for Penny Auctions seems to have decreased to 25-35 percent from when it was on the top a few years ago.
Even the authors of “How to win Penny Auctions” seems to have lost most of their interests in this market, but they are still selling a few books now and then at reduced prices. They doesn’t even bother to update their websites with new and interesting stuff, except for some price reductions.
The only “Money Making Machine” here seems to be to lure investors to invest money in the opportunity, by promising them a significant Return of Investments within a short period of time.
And Zeekler doesn’t disclose how much of their revenue is affiliate and how much is retail.
If the retail revenue was that great, you would think Zeekler would make that disclosure a major part of their advertising. Then again, if retail revenue was real, Zeekler could hire a NY ad agency for 10% what they are “paying” affiliates to post on spammy free classified sites.
For all of the faith that distributors have put into the “policies & procedures,” “industry-leading mandatory compliance training,” and “MLM legal dream team”… is it too much to simply ask what the ratio in revenue is between retail business vs. affiliate business?
* Retail business revenue = real customers buying real bids to the penny auction)
* Affiliate business revenue = initial deposit, monthly subscription, various co-marketing subscriptions.
What is scary is that even if that ratio is not 1-to-10 now, imagine what it would be if Zeekler continues for another year or two. I see some big lawsuits coming.
At least with most other MLM’s if you do not recruit and lose money, you have some products to show for it and knew going in you have to recruit to be profitable.
Here, you are being sold no recruiting required and so the carnage will be much greater when this thing crashes.
I can give my bids back to Zeek who then pay me a return before they’ve even given the bids away.
It’s ridiculous to assume that Zeek will now and forever more generate enough retail customers to cover the ever-increasing amount of bids Zeek members are giving away to the company.
All Zeek has to do is increase the max amount you are allowed to give to your existing customers. The maximum is 100 for Silver and 1,000 for Diamond. So if I have paid my co-marketing fees for Zeekler to recruit 10 people on my behalf, as a Diamond I can only giveaway 10,000 bids.
If Zeek were to suddenly change the limit of bids you can give away from 1,000 to 5,000 for Diamond, then the “company pool” will now automatically distribute my bids that I earn daily to my existing customers since the new limit is 5,000 per customer.
Interestingly, there are several reports of bids being giving away and customers not receiving them. Zeek is saying it is a software bug. Maybe the answer is that Zeek doesn’t care that much about actually giving away free bids to customers because they are nearly worthless and customers don’t use them and most of the bids giving away probably just waste away in unused customer accounts.
Are these real customers? Maybe an email list from other penny auction sites?
Note that you do not need a street address or any verification to be a customer and receive free bids. Just an email account. You could create 20,000 fake email accounts and receive free bids from the company pool even if there was not enough bids available from distributors.
Distributors will be forever indebted to the company pool, and thus never run lose the ability to giveaway bids and earn profit share on those bids.
It’s getting rather Gestapo over at Zeek HQ…
Meanwhile the fact remains that you can join Zeek Rewards, invest in some VIP bids, give these bids away to the company, receive VIP points and receive a return on your investment before the bids have even been given away.
If Zeek are serious about being compliant, how about the company go public with how large their ‘bids waiting to be given away to customers’ balance is and just how much of the revenue share is made up of new and existing members investing into the scheme vs. sales in the stores and auctions?
That’d be much more productive compliance wise than forming silly little internet police gangs.
How can Zeek to control the internet? Suppose they continue to grow as much as they have. If you cannot contain 40k distributors how will you contain 400k or 1 million?
Zeek linked to Dooley’s latest video that talks up Zeek. Interesting that all of Dooley’s love for Zeek centers around the MLM aspect only, and did not touch on the investment scheme in this video.
The MLM may be fine even with the bids is Zeek claims the products are virtual entertainment, but still not sure how Zeek can survive any scrutiny on the investment scheme. Many a surf have gone down when they got large enough that the FBI took notice.
Just because they make you sign a document saying “this is not an investment” and you go through compliance training where they hammer it in “do not say this is an investment,” how do you think distributors recruit others?
It’s like watching a Harry Potter movie and everyone not saying he who must not be named but we all know who it is so stop pretending.
Back to the “Q:What walks like a duck, quacks like a duck, but insists it’s not a duck?”… (A: A lying duck)
Which only goes to prove that ZeekRewards was a half-baked concept and never worried about compliance before in its life.
I would like to know why all the customers supposedly given from the company pool all have the same name format – their first name and some number behind it – there is no way that all these people signed up the same way with the same name format – i think its a scam.
@John, they are probably just assigning user accounts based on the other penny auctions they have purchased. That is probably how they “give you customers” that you pay for with the 5cc.
All the advertising for Zeekler is done by affiliates. There is no way the search engine traffic by itself can bring in that many customers. So either you are getting fake customers, or Zeekler is just buying other dead penny auction customer lists and assigning you customers.
That part of the business could be successful, that is buying failed penny auctions and giving away bids to entice users to return, if Zeekler was a decent penny auction, but it cannot even compete with the top 20 or 30 penny auctions that operate in the US.
What probably is happening is someone visits with the free bids, sees how terrible the penny auction is, then never comes back. But that doesn’t matter because Zeek Rewards isn’t paying out much profit share based on the penny auction itself, but instead the recruitment as many on here have already stated.
All those who are defending Zeekler as a great revenue source, just go and sign up for any other penny auction you can find on the first 3 pages of Google and see what a vastly different experience you have with a real penny auction that are not using diluted bids, have real prizes and are running many concurrent auctions.
Or here’s one possible other reason, from Zeek Rewards themselves:
Riiiight. “Thieves”… you mean Zeek Rewards members right?
Looks like Zeek Rewards don’t want to compete with their members in the fake customers arena.
If this is the case then the whole thing is doomed, am I right? I thought the whole point was to take “profit” from the auctions as well as “other revenue” and pay the affiliates.
If there is no real profit and no real customers or very few for that matter and most of the money is coming from new affiliates then is this not a ponzi?
It is a pyramid scheme in the sense that you pay to join, which qualifies you for payment (with additional requirement that you post ads and give away some bids) by recruiting other paying members.
Whether it is also Ponzi scheme where later joiners’ money just move to the early joiners… well, it’s possible. it depends on how much profit is earned from the bids and the profit from the auctions, and how much is earned by each.
If aggregate payout (to all Zeekreward members) is vastly greater than the aggregate monthly dues, then it’s probably NOT a Ponzi scheme as the members are being rewarded. If they are very close or payout is LESS than dues then it’s very likely a Ponzi scheme.
I am an affiliate with the company and I am seeing all the red flags everyone has posted. There is absolutely no way the company is bringing in that much money to pay its affiliates what it does on a daily basis through the penny auction profits.
Most of the auction have a percentage sign which means you can only use VIP bids to bid on the auctions. When a diamond affiliate pays $99 a month, that affiliate then receives 250 bids. That equates to 40 cents a bid. Many individuals who have meetings to promote Zeek say each bid is worth a dollar. Smells to me.
I believe a majority of the money given to new affiliates is coming from new affiliates joining and “investing” in the company.
The auctions quite frankly suck, and it’s damn near impossible to win one. My money is already in and I have recruited three people, but I stop recruiting and I will do my best to help others get back their initial investment.
I don’t really understand your problems!
You say that it’s a pyramid system. No, it is MLM. What is the difference? not much, but the pyramid system is illegal and mlm is legal. Because there are stuff behind the system.
Why you get money? Because you “work” (post ads). So you work for your money. It is not important how much you work.
Probably the company gets much more money from affiliates. Till the bid auction part of the company exists it is legal.
Probably you have already heard about Avon. There are also stuff. It is also an MLM system, but it is a much smaller company.
No I didn’t.
If this was remotely true, then in the case of the banned members from the six countries ZR are claiming there are active sanctions in place (despite the abundance of other companies doing business there), members would have been compensated for doing “work”.
Instead all they are being refunded are their investments in the sceme (membership fees and bid purchases). Face it, the word is useless and of no value, it just masks the Ponzi scheme.
No, it isn’t.
Avon members sell products and don’t earn a guaranteed 90 day ROI on the purchase of said products.
As you already said, MLM is legal, and pyramid scheme is illegal.
So what’s the difference? You didn’t name it.
The difference is rather simple:
In MLM, your pay is dependent on SALES (either by you or your downline).
In a pyramid scheme, your pay is dependent on RECRUITING people to join
Avon ladies are paid by their sales. ZR does NOT pay by sales. Thus, your comparison does not stand.
In ZR you don’t have to bring people to the matrix. If you don’t deal with the matrix, you won’t get money from matrix system.
But you will get money according to your VIP bids. It is 2% on weekdays and on weekend it is 1,5% because people buy less stuff on auctions. So your pay is dependent on sales.
If an avon lady introduces the company to an other member, she will get the stuff cheaper.
No it isn’t. You invest in bids, dump bids on fake accounts and earn a ROI for 90 days.
That is why ZR an investment ponzi with a pyramid/recruitment matrix, but even the top affiliates make much more from the ponzi than the matrix.
Don’t you find it interesting that ZR adopted the same initial compensation plan as every HYIP and AdSurf out there, including the 10% and 5% commission for levels 1 and 2?
No it isn’t. You can sell NOTHING and still earn an ROI over 90 days. The fact that the overall company sells something is not relevant in this case. Other MLM’s pay commission when YOU sell something.
If this were true, Zeekler would not need Zeek Rewards. Instead of paying affiliates up to thousands (some tens of thousands) per day for posting one useless classified ad, Zeek Rewards could simply outsource it for pennies on the dollar (pun intended).
If Zeekler relied on the classified ads for new revenue, it would hit a saturation point. What’s the difference between, say 100,000 ads on the same site vs. 1,000,000 ads on the same site? The click through rate will be the same (assuming people even go to free classified sites). 100k vs. 1M may be bit extreme but it proves the point. Now compare say 1000 vs. 25,000 ads – same analysis/same result.
If Zeekler relied on classified ads for new revenue, they wouldn’t have to entice affiliates to purchase bids for themselves using fake customers with matching VIP points (this is how most top affiliates created a larger starting balance than $10k, and also how to use credit cards for VIP points after credit cards were banned in Dec).
Zeek rewards is a VERY intelligently built PONZI. I am an affiliate and have been for quite some time and there is no way they make enough money to pay the thousands of dollars a month to the hundreds of thousands of affiliates they have.
It’s a typical HYIP with an added trickle of cash flow via the penny auctions to keep things moving a little longer, add that to the 3 month minimum it takes to get your money back, the 90 max life of VIP points, the “variable” payout percentage that can be used to message their cash outlay as needed, as well as all the people around the work that throw in a hundred bucks or so but don’t stick with it and you have a money funneling program that could last a very long time.
I have made thousands and so have many people in my upline. Get in this year at the LATEST because you might not get your money back if you dont!
We have mostly used the definition “Ponzi scheme”, focusing on the investment part rather than the networking part. And it’s not about laws, it’s about analysing business models and using common expressions.
I posted some of the definitions 8 or 9 days ago in another thread about Zeek Rewards, and the following quote is part of the first of these 3 or 4 comments (click on the link if you will read the rest of the post there):
The audience here is a “general audience” of “normal people”, without any specific profession (like lawyers and so on). It means we will assume they have some general knowledge, without being overfocused on specific areas where they are “experts”.
ZeekRewards is considered to be a Ponzi scheme by most people here, but there’s also lots of comments defending it. Its “true nature” will probably reveal itself sooner or later.
Ponzi schemes will usually collapse when the investments slows down and people starts to withdraw money, or sometimes they will be shut down by authorities even before they collapse.
“Because you “work” (post ads). So you work for your money.”
I have analysed this part too, in the other thread. In ZeekRewards there is a closer relation between the amount you have invested and the ROI generated, than it is between the work done and the amount paid.
People can do exactly the same work and be paid differently, because the payment is more related to the amount of money or VIP Points they have invested than to the work done.
Note: We don’t analyse laws, but we will usually analyse the true nature of a business model – and ignore “smart definitions” where people are trying to bend the rules.
Well said. In the HYIP world, most people enter knowing the program is likely ponzi or scammy. Sometimes there are legitimate underlying revenue sources but they are all high risk and the revenues don’t last long.
There have been combination ponzi/forex schemes that do well for short periods of time until the forex side stops producing (then it’s just a plain ponzi).
The problem with Zeek is there is no significant revenue source outside the ponzi. I like your explanation of “trickly of cash flow” from the penny auction site.
Oz has analyzed the penny auction business here to show it can’t compete with other PA’s, and the stick rate for new customers to a normal PA is short-lived to begin with.
I’ve commented on the bid inflation and bids in circulation relative to prize availability. K Chang has asked some critical questions on why Zeekler needs Zeek Rewards and broken the analysis down nicely into discrete scenarios showing that ZR needs Z for illusion of revenue source.
Yes you are right, part of the company is based on this plan.
I have talked to my lawyer and I told him to decide if it was ponzi “game” or mlm. And he told me that there you can find both features, but due to the fact that you can get money according to your vip it is legal.
And he told me that in Ponzi “game” the first person gets all the money and he/she has to redestribute it.
Between ponzi and mlm systems there are usually a narrow borders.
I forgot to post:
It is legal in MY COUNTRY. So it can be illegal in your county.
The scheme itself is illegal to organize and run, in most countries we know. But people who uses this website will usually not study laws in each and every country in the world.
Your lawyer probably meant “It is legal for you to participate as an investor, since you can’t know for sure where the revenue comes from”, based on a description you gave him?
By the way, Ponzi schemes are not “games”. Your lawyer has used a misleading way to describe things. He should have given you clear and factual information.
The reason why Ponzi schemes can be legal to participate in is because most people don’t know they are Ponzies before they collapse. They consider them to be “ordinary investments, based on a genius formula or some very profitable investments”. Most participants will also become victims when a scheme collapse.
It seems to me that a lot of people forget how Zeek is set up to grow your vip points without having to recruit a bunch of people. So what does it matter if you aren’t supposed to use the term investment?
People are really getting their panties in a twist over the compliance speech. Well good for the haters, they can all sit back and sow seeds of doubt while the zeek affiliates rake in the rewards.
This wouldn’t be an issue if VIP points didn’t pay out a 90 day ROI. Get enough people ‘growing their VIP points’ and with no recruiting (of customers or affiliates) going on the question of ‘where is the ROI money coming from?’ becomes key.
If you can’t see the problem with the above scenario well… that’s why Ponzi schemes like this initially take off.
Then it’s an ILLEGAL investment and fraud because it *is* an investment, but they’re telling people it isn’t.
Just wondering, what is your lawyer’s specialty? Does he specializes in corporate law, securities law, MLM law, or white collar crime defense? I question what is he basing that opinion on, because he basically said “because you are paid by your VIP points, it seems legal”. Was he aware that VIP points come from bid purchases?
Are we talking the same thing here? In Ponzi scheme, the “company” redistributes the money, which would be ZeekRewards in this case. Yet you make this “first person” sound like someone else.
There’s a thin line between MLM and PYRAMID SCHEME, not Ponzi scheme.
If you don’t involve the matrix commission, then it becomes a very straight forward Ponzi scheme. You buy bids with your money, bids turns into VIP points, and VIP points turns into money back into your pocket. You paid yourself. Ponzi scheme.
That is not proven. The formula is a SECRET, and secrecy is a characteristic of a Ponzi scheme. Bernard Madoff reportedly said his investment strategy is too complicated for normal people to understand.
No she won’t. The commission rate based on SALES will be higher depending on volume milestones. Again, pay on SALES, not recruiting. If her recruit doesn’t sell, she earns nothing (other than what she earned herself).
If they were to show their daily overall sales profits (all their companies….as you know they have been around for 15 years), not including new ZR members enrolling or purchasing bids (which I would think is an actual purchase of goods under the laws) and it could be validated to the AG’s satisfaction, what would the consensus be here?
If you are purchasing bids, and posting ads to drive to your website (this is out there in propensity in most internet ‘marketing’ companies), and you give the bids to your friends to visit your website……what do you think of that scenario?
They are ‘selling’ bids that can be redeemed. Some folks buy more as they get hooked on the auctions as do many folks on eBay. Then there is their retail division and other ancillary businesses.
I would love to hear what ‘would’ be an acceptable model utilizing their assets.
All they need to show is Zeekler, the rest of Rex Venture sites are irrelevant.
The problem is in the first line, “you are purchasing bids“. 100% internal consumption.
Yes, we’ve heard the marketing spiel but where are these customers? How does revealing how many actual retail customers you have, or better yet how much retail customer money makes up the daily profit share constitute a proprietary figure?
You only hide behind that bullshit if you don’t want to reveal the figure because it’s so insignificant that it gives the ‘we are using affiliate money to pay affiliates’ game away.
Reveal daily statistics (or even monthly) of how much affiliate money is funneled into the daily profit share, and how much of it comes from customer bid purchases.
Either your legitimate or you’re not, numbers don’t lie.
No comment on the rest of RVG companies… as they are not relevant.
What exactly are you getting paid for? Posting of ads? or for buying bids?
They are also selling to affiliates, and paying them to buy more.
Maybe, affiliates are not rewarded much for bringing in such customers. Most of the profit is in the daily RPP.
Again, not relevant. ZeekRewards as its name suggests, had always been advertised as advertising division of Zeekler, and nothing else.
Get rid of ZeekRewards. It’s the ONLY THING that’s potentially illegal in the whole business that I can see.
There are well over a dozen penny auctions firms out there, already running and hosting thousands of auctions a day, without a MLM / Matrix / profit-sharing reward plan. In fact, there is actually a Penny Auction Merchant Association (to which Zeekler is NOT a member).
In fact, do this little thought exercise.
Last year, according to their income disclosure statement, they paid out 58.5 million dollars to affiliates. That’s in 2011. That was calculated from average payout and number of affiliates. That comes out to 320K of revenue PER DAY. (Up to 50% of that being “shared”)
It’s now July 2012. Would you say they are doing 450K of revenue per day? Go count the number of auctions they do and the bids used in each and all that in 24 hours. DO they add up to 450000 dollars?
I don’t think so.
So where are they getting the rest of the revenue, if it’s NOT USED in the auctions? This is where you trace the money. To them, revenue is when bids are PURCHASED, not spent. However, if you count the auctions, it’s clear that the bids spent in the auctions can’t account for all the alleged revenue being shared.
So it’s clear someone is buying bids, not not spending them.
A regular bid buyer would NEVER do that, at least to large extent. They buy a 100 bids, and they spend a few here, a few there…
But an AFFILIATES would buy huge number of bids (we’ve heard story about buying 10000 and more) and then “give them away”, and be rewarded with RPP points.
And nobody ever knows if the bids you gave away was spent by a bidder or not. You are rewarded for giving them away, so the story goes, so nobody cares.
So it’s clear it’s the affiliates who are buying all those bids, and not using them, thus generating those huge profits to be shared.
AND they are encouraged to LEAVE the $$$ in as “repurchase”.
At best, they gave Zeek a free loan for 90 days.
At worst, their money just went into all the OTHER affiliate’s pockets.
Thus, potential Ponzi scheme.
If ZR did away with VIP points they could eliminate 95% of their pending problems. But if they did that they would also eliminate 90+% of their affiliates.
The ever compounding VIP point totals allow you to put in X amount of money (plus a monthly subscription fee) and as long as you remain “qualified”, in time you can take many times more that the original sum you invested.
Unless the auctions are surrealistically profitable (and they’re not) the whole model is mathematically unsustainable.
If the Zeekler auction site was near as viable as they claim you should be able to earn a respectable (and legal) living from selling bids on a commission basis.
Keep the monthly subscription levels and the matrix in place. Then just pay out 50% of the retail bid sales across your up and down lines. This could be a perfectly legitimate MLM company but it would never experience the “explosive growth” it has “enjoyed” but it also would be facing the inevitable collapse looming in the future.
I’ve followed these controversies from the beginning ie Jan 22nd 2011, to the last one, July 5th 2012.
“Did Hamilton have it right or did Jefferson ?” They have both to have been pretty well “right” to the extent that the United States of America rolls bumpily along – like the powerhouse that it is.
Did we read Supreme Court Chief Justice John Roberts’ Health-care Bill justification of, essential parts of the Republican format, along with essential parts of the Democrat format, in upholding what’s an advance on the past stratification of Health-care problems ?
OK ! Zeek Affiliates ARE being rewarded well. Legality derives from a cold reasoning out of ever existing ‘twists’ – present everywhere – so as to put into place a workable solution.
That being said, how about some input here now from Attorney Kevin D Grimes in his role as President of MLM Compliance, VT. That will help. What-ever the present legality of today’s MLM concept may be required to confront later on, is in the realm of conjecture of what is largely unknown – not of fear and confusion leading to inaction.
Today’s existence of the Ground Floor is Real – whether the Tower it supports, later starts to lean like Pisa or seeks the upright perpendicular !
Wish i had read all this before i became a Diamond Affiliate with Zeek Rewards 4 mos. ago. NOw to “get out”. The enticing marketing tools and complex hard to understand system is a problem. It drew me in. Only now to begin to study it more from within and then start to ask questions.
Glad my friends did not become affiliates. Not looking foward to sitting down with my accountant and explaining all this.
I am Ok with initial expenditure and with monthly subsciption and not realizing any disposable income as i have been repurchasing bids to give away with 100% of my daily profit pool. It is easy to have this attitude as i am financially secure and time to post an add all these months was not a big deal.
To continue to stay active with Zeek i would now feel like i might be contributing to the possible demise of others in the future. I felt better when i thought i was contributing to the “success” of others.
There are a lot of wonderfull people in Zeek and i wish them well. Just not worth the loss of peace of mind that seems to be slipping away for me.